Tuesday, May 1, 2012

Integrated Device Technology has signed a definitive merger agreement to acquire PLX Technology (PLXT) for $3.5 in cash plus .525 IDTI shares. Based on the closing price of IDT's stock on 4/27/12, the transaction is valued at approximately $7 per PLXT share. PLXT shares rose over 68% in after hours yesterday in response to this announcement.

I own 70 shares of PLXT as part of my Lottery Ticket Basket Strategy. Bought 70 PLXT at $3.37-a LT (February 2011). I last discussed PLXT in a February 2012 Post, where I mentioned that a hedge fund had stated in a Schedule 13-D that the company needed to seek a buyer. PLXT Most likely, I will sell this position and use part of the profit to buy another "black" chip.

As recently mentioned, I modified the Lottery Ticket Basket Strategy to permit the OG to play one blackjack hand with a $100 black chip for every $100+ realized gain in this basket strategy, starting in 2012. Item # 5 Modification of Lottery Ticket Strategy Last weekend, I played one hand with a $100 black chip representing part of the $708.86 profit realized from 30 shares of GRTPRF earlier this year. I won, but it took two hands. The first hand was a push with both the dealer and I having 19. I won the next hand, and $320 over the course of my total playing time of 3 hours. That sum will be reported to the IRS as gambling winnings without any offset for gambling losses, since I do not itemize. I now have two black chips for the year end push.

Andrew Bary argues in this week's Barrons cover story that the DJIA is in need of a makeover. I would certainly agree that Apple needs to be in that average, hopefully replacing the hapless and frequently embarrassing Hewlett-Packard. Alcoa needs to get the boot too, but I would like to see a successful industrial company replace it. Bary does not mention Emerson Electric Company, Honeywell International (a former component) or Danaher Corporation as potential replacements.

As for Bank of America, Ken Lewis made one of the worst mistakes in the history of capitalism by acquiring Countrywide. Only Citigroup makes BAC look good, and Citigroup has already been ejected from the DJIA for good reason. BAC just has too many problems and simply does not deserve to be included in the DJIA anymore. The stock has gone from over $50 before the Near Depression to single digits now, and the quarterly dividend has been slashed to just a penny. That is not in a sign of excellence but of colossal stupidity. Wells Fargo would be a suitable replacement or possibly Berkshire Hathaway.

I have read at least two novels written by E. L. Doctorow, but have never heard him voice an opinion on political and constitutional issues. His opinion column published in the NYT is bursting with anger and justifiable criticism aimed at Bush Junior and the pseudo conservative Supreme Court majority. I gather that he is a liberal, but his criticisms could just as easily be voiced by True Conservatives for many of the same reasons. There are no real conservative values manifested in any of the actions criticized by him. Instead, all of those actions were taken by those who claim to be conservatives but instead advance an agenda antithetical to True Conservative values and positions.

J.P. Morgan upgraded Sandridge Energy (SD), a LT selection, to overweight from neutral, and increased the price target to $13 from $9.5. There is also a recent article, published at Motley Fool, that argues that recent acquisitions will cause SandRidge Energy stock to "soar". SandRidge Energy shares rose 5.97% yesterday to close at $7.99.

Goldman Sachs started coverage of Supervalu (SVU) with a sell rating. The stock was selling at below levels prevalent in 1985 before GS slapped that sell rating on it. SVU Interactive Chart

1. Susquehanna Bancshares (own: common as part of theLottery Ticket Basket Strategyand 80 Shares of the TP SUSPRA): Susquehanna Bancshares reported net income of $23.5 million for the first quarter or 14 cents per share. As of 3/31/12, the net interest margin was 3.94% (+31 basis points from 2011 first quarter); the efficiency ratio improved to 61.39%; the total risk-based capital ratio ratio was 14.45%; the tangible equity ratio was 7.64%; and NPAs as a percentage of loans, leases and foreclosed real estate was 1.35% (down from 2.49% as of 3/31/11)

On the day of the earnings release, which was last Thursday (4/26/12), the common shares rose 49 cents or 4.97% to close at $10.25. SUSQ Historical Prices

2. Univest (UVSP)(own:Regional Bank Basket Strategy):Univest reported net income of $5.3 million or 31 cents per share for the 2012 first quarter, up from 23 cents per share in the year ago quarter.

The estimate made by one analyst was for 32 cents.

As of 3/31/12, the net interest margin was 3.95%; NPLs were at 3.02% of total loans; the allowance for loan losses to NPLs was 69.39%; the total risk based capital ratio was 15.76%; and the return on assets for the quarter was .97%.

Univest was a recent addition to this basket strategy. Bought 50 UVSP at $15.1 (3/6/12 Post) The purchase was based primarily on the dividend yield and the total return potential with a dividend yield in excess of 5%.

3. Husky Energy (own 200 shares:Canadian Dollar (CAD) Strategy):Husky Energy reported net earnings of $591 million or 60 cents per share, a 22% increase on a normalized basis from the 2011 first quarter. Cash flow from operations totaled $1.2 per share down from $1.3 a year ago. Total production per day, excluding royalties, averaged 320,000 barrels of oil equivalent, up from 310,000. The Liwan Gas Project in the South China Sea is progressing according to plan with the first production expected in late 2013 or early 2014.

The Husky Board declared a 30 Canadian cent quarterly dividend, payable 7/3/12 to shareholders of record on 5/22/12.

Husky Energy rose 44 cents on the Toronto exchange in trading yesterday to close at 25.77 CADs. The shares are available for purchase in the U.S. on the pink sheet exchange: HUSKF

4. Unilever (own:Large Cap Valuation Strategy at the time of purchase): After trading UL shares during the Near Depression period, I decided to keep my last purchase which was just 70 shares bought at $18 (March 2009):

Unilever Average Total Cost Per Share=$18.16

Unilever PLC announced last week a 8% quarterly dividend increase to €.243 and better than expected results for the first quarter. Revenues rose 12% in the quarter to €12.1 billion or about $15.99 billion USDs. Excluding acquisition, disposals and currency movements, revenues rose 8.4%, compared to the consensus of 6.4%.

On the day of this earnings release (4/26/12), the UN shares rose 3.12% to close at $34.74. UL Historical Prices

The results from Unilever need to be contrasted with the recent dismal results posted by P & G.

5. Banco Santander (own 130 shares of STDPRB, an non-cumulative equity preferred floater): STD reported a decline in net income to €1.603 billion, below the consensus forecast of €1.64 billion, from €2.1 billion in the year ago quarter. Loan loss provisions increased 51% to €3.13 billion. NPLs rose to 3.9% of total loans from 3.61% in the first quarter of 2011. santander.com

The results are discussed in this DJ newswire story and at MarketWatch.

6. Sold 50 Pepsico at $66.48 Roth IRA Last Thursday(see Disclaimer): While the poor results released by Pepsico had been telegraphed by the company, I was hoping that management was being unduly pessimistic for 2012 earnings, when the company announced in February that core earnings would decline 5% in 2012. Press Release on 4th Quarter Results

The earnings for the first quarter were so lackluster that I decided to jettison the fifty shares recently bought in the ROTH IRA. Bought 50 PEP at $62.69-ROTH IRA

2012 PEP 50 Shares +$175.42-ROTH IRA

I still own 30 shares in a taxable account bought at a lower price.

PEP reaffirmed its earlier guidance that adjusted net income would fall by 5% in 2012. SEC Filed Press Release Net income was $1.3 billion or 71 cents per share, down from $1.14 billion in the year ago quarter. Excluding special items, PEP reported 69 cents per share. Operating profit for Frito-Lay North American rose just 2%.

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About Me

I am no longer in a capital accumulation phase. My key investment objectives are capital preservation and income generation.
I started to buy stocks in the late 1960s.
I have a balanced worldwide portfolio with a considerable allocation to cash. Starting in December 2016, I started to reallocate out of cash and into high quality short and intermediate term bonds and FDIC insured CDs using a ladder strategy.
I have been paring my stock allocation, selling gradually into the robust stock market rally occurring since the U.S. election.
In this blog, I will be discussing only a sample of my recent stock trades. I will be discussing almost all of my bond and CD trades.

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Disclaimer

I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this blog, I am acting solely as a financial journalist focusing on my own investments. The information contained in this blog is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this blog is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. For purchases of bonds and preferred stocks, the prospectuses need to be reviewed until fully understood by the investor.